[On
Aug. 3, a federal judge in New Jersey signed a sealed indictment against Ms.
Ma, her company and three of her colleagues, charges that were made public on
Monday. Justice Department officials traveled to Beijing to alert Chinese
officials to the activity, and this month the Chinese police opened their own
criminal investigation into the company, which is based in Dandong, a Chinese
city across the Yalu River from North Korea.]
By Michael Forsythe
 |
|
From
Dandong, in northeast China, one can see the North Korean town of Sinuiju
across the
Yalu River. The countries are joined by the China-North Korea
Friendship Bridge. Credit
Greg Baker/Agence France-Presse — Getty Images
|
HONG
KONG — The United States
Justice Department has filed criminal charges against a Chinese executive,
accusing her, the company she owns and several of her colleagues of violating
American sanctions meant to choke off funding to North Korean companies that
help Pyongyang develop nuclear weapons.
Ma Xiaohong, 44, is the owner of Dandong
Hongxiang Industrial Development Company, a trading company that in one year,
according to United States officials, handled more than one-fifth of the
commerce between North Korea and China. She and her colleagues worked with
Kwangson Banking, a North Korean bank that has been the subject of American
sanctions for years, to set up shell companies in Hong Kong and offshore tax
havens to disguise the activity, the Justice Department said in a statement
released Monday.
On Aug. 3, a federal judge in New Jersey
signed a sealed indictment against Ms. Ma, her company and three of her
colleagues, charges that were made public on Monday. Justice Department
officials traveled to Beijing to alert Chinese officials to the activity, and
this month the Chinese police opened their own criminal investigation into the
company, which is based in Dandong, a Chinese city across the Yalu River from
North Korea.
Last week, researchers in South Korea and the
United States published a report that said Dandong Hongxiang exported materials
to North Korea that included aluminum oxide, which can be used in the
production of nuclear weapons. China is North Korea’s largest trading partner.
In addition to the criminal charges against
Ms. Ma and her colleagues, the Justice Department, in a separate civil suit, is
seeking to seize funds in 25 Chinese bank accounts that it says were used by
Dandong Hongxiang and its front companies.
The shell companies set up by Dandong
Hongxiang, stretching from Hong Kong to the Seychelles in the Indian Ocean to
the British Virgin Islands in the Caribbean, were used to register bank
accounts in China, hiding the North Korean origin of the funds and hence
engaging in money laundering, the United States charged. In some instances,
those banks dealt with American lenders, so-called correspondent banks, to help
facilitate dollar-denominated transactions, the Justice Department said.
The United States and Chinese banks involved
are not being accused of wrongdoing, the department said in the statement.
“The charges unsealed today reflect our
nation’s commitment to using all tools to deter and disrupt weapons of mass
destruction proliferators,” John P. Carlin, the assistant attorney general for
national security, said in the statement. “One of the strengths of our
sanctions programs is they prevent sanctioned wrongdoers from engaging in U.S.
dollar transactions.”
But the sanctions against the North Korean
bank, announced in 2009, did not stop Dandong Hongxiang from disguising their
business for seven years, the United States alleges. Some of the paperwork that
Ms. Ma and her colleagues filed to set up shell companies is contained in the
Panama Papers, the massive trove of leaked records about offshore companies
that was made public this year by the Washington-based International Consortium
of Investigative Journalists.
Mossack Fonseca, the Panamanian law firm
whose files were leaked, helped set up some of Dandong Hongxiang’s shell
companies, and the documents show that at least in one instance, it appeared to
do little to comply with rules that even lax offshore jurisdictions set up to
help prevent money laundering.
Those documents show that in May 2011, two
years after Ms. Ma set up her joint-venture company with the North Korean bank,
she registered a shell company in the Seychelles, the Indian Ocean island
nation that in recent years has become a haven for money laundering because of
its corporate secrecy rules.
The dozens of leaked internal emails about
the shell company, Sky Bright Development, do not reveal its purpose, but such
shells can be used to hold stakes in other companies or to set up bank accounts
that are extremely difficult to trace. The registration was facilitated by
Mossack Fonseca, which specializes in setting up offshore companies for clients
around the world, and whose biggest market is China.
Mossack Fonseca conducted a search to find
out whether Ms. Ma had any criminal background or was a “politically exposed
person,” or P.E.P. — usually an individual with a government post, or a
relative of such a person. Seychelles requires extra scrutiny when such people
set up offshore companies, including efforts to verify the source of the
company’s funds, because of the possibility that they are doing so to conceal
corruption.
In this case, an online search conducted by
Mossack Fonseca determined that Ms. Ma was in fact a P.E.P., showing in its
first result that she was a lawmaker in her home province of Liaoning in China,
according to the leaked records. Yet Mossack Fonseca’s own internal records
subsequently indicated that Ms. Ma had not been designated a politically
exposed person.
Representatives at Mossack Fonseca’s Hong
Kong and Seychelles offices did not respond to an email seeking comment, and no
one at Dandong Hongxiang answered a phone call made during working hours on
Tuesday.
Follow Michael Forsythe on Twitter
@PekingMike.